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Term Sheet — Monday, November 24

Random Ramblings

E-commerce company is still worth $1 billion (on paper). But that’s only because it hasn’t yet completed a reported fire sale of its flagship assets, nor raised new cash for a furniture-focused subsidiary called Hem that is expected to soon become an independent entity. When the smoke clears, expect the Company Formerly Known as Fab to have the same shareholders but a much lower valuation.

For many, the knee-jerk reaction to Fab’s quasi-demise was to use it as an example of venture capitalist folly. More than $330 million invested into a company that originally began as a social network for gay men, before pivoting into a flash sales site whose primary point of differentiation was supposed to be its ability to spot style trends better than all of the other flash sales sites (eventually, Fab abandoned flash sales for a more traditional inventory retail model). That popping sound you hear is proof that the bubble was real, propped up by overzealous Fab investors like Andreessen Horowitz.

But, to me, Fab’s possible failure is important for almost the exact opposite reason: It reminds us that venture capitalists have generally been right in making their $1 billion bets. Fab is the exception to the rule, rather than the rule itself.

One year ago, Aileen Lee published a post on TechCrunch about the preponderance of “unicorns” — companies Lee defined as “U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors.” She found 39 of them (including Fab), of which 14 were still privately-held at the time.

And, from what I can tell, the vast majority of those 14 are still considered to be unicorns. The only exceptions would be Fab, Climate Corp. (later sold for a very respectable $930 million to Monsanto) and possibly Gilt Groupe or Box. Many of the others, including AirBNB and Uber, have seen massive valuation increases in the intervening year.

Moreover, RetailMeNot  is the only one of the publicly-traded companies Lee listed that has since fallen below the $1 billion valuation mark.

To be sure, we cannot use venture’s traditional 1/10 success model when coming to unicorns, since these are more mature companies that require much larger equity outlays than would typical startups. And it’s possible that we would see something different if we updated the chart, and then checked back in November 2015.

But, for now, Fab should remind us that for all the talk about overpaying on large deals, VCs have generally been getting their money’s worth.

• Buffett bait: Last week came word that The Blackstone Group was prepping a “core” private equity fund that would have a longer investment cycle, lower fees and back slower-growth/safer companies. Today, Bloomberg reports that The Carlyle Group is prepping something similar. Three notes on this: (1) It’s notable that both of the reported sponsors here are publicly-traded, given how Wall Street is known to value fee-paying AUM. (2) Like Berkshire Hathaway, neither Blackstone nor Carlyle has publicly-announced a long-term succession plan. (3) There is at least one “traditional” private equity firm, Lindsay Goldberg, that raises 20-year funds.

• Structural differences: One of the interesting responses to last week’s Uber kerfuffle were pundit pleas that the company’s investors should “do something.” I don’t know Uber’s specific governance structure, but do know that many of Silicon Valley’s hotter startups structured their early investment rounds in a manner that precludes actual VC control. Consider it the Zuckerberg Power Shift. As such, a VC’s only real influence can be advisory, thus making it even more likely that they’d try to work behind the scenes rather than lambasting their entrepreneur in public.

• Checking: A Massachusetts judge last Friday approved the $590 million in previously-announced settlements related to private equity’s giant collusion case, before vacating the order later that same afternoon. Still trying to get some clarity on the matter, and if it relates to some written objections over attorney fees.

• PE tax wonkery: Interesting new paper from UNC academic Greg Polsky on techniques private equity funds use to minimize taxes (beyond carried interest, of course). You can read it here.

• 44k and counting… Every time I add another thousand Twitter followers, I like to remind you to join the others. That way we can chat throughout the day. Follow me @danprimack.


• Sentient Technologies Inc., a San Francisco-based developer of “massively-scaled artificial intelligence” solutions, has raised $103.5 million in Series C funding. Access Industries led the round, and was joined by Tata Communications and return backers like Horizons Ventures.


• Yik Yak, an Atlanta-based hyper-local social messaging app, has raised $62 million in Series B funding led by Sequoia Capital at a valuation “in the low hundreds of millions of dollars,” according to the WSJ. Existing shareholders include DCM, Azure Capital Partners, Renren Inc., Tim Draper, Vaizra Investments and Atlanta Ventures. Read more.

• Host Analytics, a Redwood City, Calif.-based provider of enterprise performance management solutions, has raised $25 million in new VC funding. Centerview Capital Technology led the round, and was joined by return backers Advanced Technology Ventures, Next World Capital, StarVest Partners and Trident Capital.

• Everything But The House, a Cincinnati-based online estate sale company, has raised $13 million in Series A funding from Spark Capital and Greycroft

• PocketMath, a Singapore-based self-serve mobile advertising platform, has raised $10 million in Series A funding from Rakuten Ventures.

• Rentlytics Inc., a San Francisco-based provider of multifamily apartment building management software, has raised $4 million in seed funding co-led by Trinity Ventures and Rincon Venture Partners, according to VentureWire.

• Recsolu, a Chicago-based provider of SaaS solutions for recruiting college talent, has raised $6 million in Series A funding from First Analysis and seed backer Generations Capital.

• Boomtown Network, a Tiburon, Calif.-based provider of on-demand remote and on-site tech support for small businesses, has raised around $3 million in VC funding from firms like Freestyle Capital, according to a regulatory filing.

• Mirador Financial, a Portland, Ore.-based provider of SMB lending tools, has raised @ million in new VC funding from Collaborative Fund, Crosslink Capital, Vesta Corporation, Wicklow Capital and angels Eric Bunting, Bruce Gibney, Robert Harteveldt, Awy Julianto, George Kenny, Bruce Weinstein and Bill Ullman.

• Apto, a Texas-based provider of CRM and pipeline tracking software for the commercial real estate industry, has raised $1.4 million in Series A funding led by Mercury Fund.

•, an Indian fashion e-commerce site focused on “Indian ethnic wear,” has raised an undisclosed amount of Series B funding. Forum Synergies led the round, and was joined by return backers Inventus Capital Partners and Ojas Partners.

• Vidcoin, a French in-app video advertising startup, has raised an undisclosed amount of funding from Kima Ventures, Virtual Network and individual angels.


• Advent International has acquired Noosa Yoghurt LLC, an Australian yogurt maker, for an undisclosed amount.

• Deutsche Beteiligungs has agreed to acquire Huhtamaki, a listed Finnish packaging company whose customers include both McDonalds and Burger King, for €141 million.

• Hahn & Co., a South Korean private equity firm, reportedly has agreed to acquire a 69.99% stake in Halla Visteon Climate Control Corp., the South Korean unit of U.S. auto parts maker Visteon Corp. (NYSE: VC). The deal could be valued at around $3.6 billion. Read more.

• H.I.G. Capital announced that portfolio company Comverge, a Norcross, Ga.–based provider of energy demand response and efficiency solutions, will merge with Constellation, a Baltimore–based competitive retail supplier of power, natural gas and energy products. H.I.G. will hold a majority stake in the combined company, which will be based in Baltimore and called CPower. Constellation had been owned by Exelon Corp. (NYSE: EXC).

• Insight Venture Partners has acquired TriTech Software Systems, a San Diego-based suite of public safety applications, from Friedman Fleischer & Lowe for an undisclosed amount.

• Onex Partners has agreed to acquire Swiss packaging company SIG Combibloc Group AG from New Zealand’s Reynolds Group Holding for upwards of €3.75 billion. Read more.

• Novacap has completed its previously-announced $35.3 million acquisition of Dialogic Inc., a Milpitas, Calif.–based provider of services to mobile operators and application developers.

• Silver Oak Services Partners has sponsored a recapitalization of VACA Fitness LLC, an operator of 17 health clubs in Utah. No financial terms were disclosed.


• Jasper Technologies Inc., a Mountain View, Calif.-based cloud platform for enterprise Internet-of-Things initiatives, is prepping a 2015 IPO that could be designed to raise around $150 million, according to the WSJ. Underwriters would include Morgan Stanley, Goldman Sachs and Deutsche Bank. Jasper has raised over $200 million in VC funding from firms like Sequoia Capital, Benchmark, AllianceBernstein and Temasek. Read more.


• Terra Firma Capital Partners has hired The Blackstone Group to advise on strategic options for Four Seasons, “following a deterioration of the UK care homes operator’s financial health,” according to the FT. Read more.


• 3D Systems Corp. (NYSE: DDD) has agreed to acquire Israel’s Cimatron Ltd. (Nasdaq: CIMT) for approximately $97 million in cash, or $8.97 per share (47.5% premium to Friday’s closing price).

• Aviva PLC (LSE: AV) said that it is in advanced talks to acquire rival British insurer Friends Life Group (LSE: FLG) for £5.6 billion in stock. Read more.

• China National Bluestar Group has agreed to acquire Norwegian solar panel maker REC Silicon for approximately $640 million.

• Grand Marnier Group (Paris: MALA) has hired Rothschild to explore strategic options, including a possible sale of the French cognac maker, according to Bloomberg. The company is currently valued at around €350 million, and could get interest from both private equity and strategic buyers. Read more.

• Krones, a listed German manufacturer of beverage filling and packaging machines, has acquired a 51% stake in Till GmbH, a developer of systems for direct digital decoration of containers. No financial terms were disclosed.

• Intesa Sanpaolo (BIT: ISP) is mulling a bid for Coutts, the wealth management unit of Royal Bank of Scotland (LSE: RBS), according to the FT. Read more.

• Speed Commerce Inc. (Nasdaq: SPDC) has acquired Fifth Gear, an Indianapolis–based provider of order management, fulfillment and customer care services. The deal is valued at $55 million in cash.

• Telefonica (CATS: TEF) is in “preliminary talks” to sell British mobile operator O2 to British Telecom, in exchange for a 20% stake in BT (LSE: BT). BT also might opt to purchase mobile operator EE instead. Read more.


• Caltius Capital Management is raising up to $500 million for its fifth mezzanine fund, according to a regulatory filing.

• Convergence Accel, a Jakarta-based VC firm focused on early-stage companies in Indonesia, has raised $25 million for its debut fund. Read more.

• Notation Capital, a New York-based seed-stage fund led by Nicholas Chirls and Alex Lines, is raising up to $6 million, according to a regulatory filing.

Polaris Partners has closed its seventh venture capital fund with $450 million in capital commitments.

• Surge Ventures, a Houston-based accelerator and seed investment firm focused on the energy-tech sector, is raising $30 million for a new fund, according to VentureWire.


• Don Cornwell has agreed to join PJT Partners, the new investment bank being formed via The Blackstone Group’s spinout of its advisory business, according to the NY Times. Cornwell is a sports-focused managing director with Morgan Stanley, where he used to work with PJT CEO Paul Taubman. Read more.

• Alex Doñé has been named head of private equity for the New York City public pension system, where he has worked since 2012. The pension system also named Neil Messing as head of hedge funds. Read more.

• Tom Rikert has joined Next World Capital  as a San Francisco-based partner. He previously was with Andreessen Horowitz, where he focused on enterprise and Internet-of-Things opportunities.

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